No March of Progress for Funds

April 07, 2004

By Amey Stone Equities nearly made a round trip in March, falling early in the month on a surprisingly weak employment report and then rebounding later as the economic and corporate earnings outlook improved. By the end of March, the average diversified equity fund was down a negligible 0.6%, faring a bit better than the S&P 500-stock index, which fell 1.5%, according to data from Standard & Poor's.

Small-caps performed better than large-caps in March, but not by much. Small-cap value funds gained 1%, and small-cap blend funds rose 0.6%. Small-cap growth funds were barely in the red, with a 0.1% decline. Large-cap value and large-cap growth fund categories both dipped 1.2%.

Buoyed by a finally improving economy, funds that invest in Japan was the best-performing category, with a rich 13.9% average return. Fidelity Japan Small Co. (FJSCX) climbed a heady 20.2%, and T. Rowe Price Japan (PRJPX) jumped 16.2% in March. Diversified Pacific/Asia funds also performed well, gaining 5.4% in March. Vanguard Pacific Stock Index (VPACX) was up 9.6%.

TECH TANKS. Some conservative fund categories performed well amid heightened volatility in the markets. Precious-metals funds returned 6%. The Midas Fund's (MIDSX) 9.9% return made it the best performer of its ilk. Real estate gained 5%. ProFunds Real Estate Ultrasector (REPIX) was the top-performer in that category, with a 7.9% return.

Latin America funds gained 1.8%, and diversified emerging markets funds climbed 1.4%, but even with these tepid returns these categories still came in at the upper end of fund rankings in March. Emerging markets remain attractive for a variety of reasons: They're correlated with growth in the U.S. economy, they're benefiting from higher commodity prices and a weak dollar, and they're still cheap relative to developed markets, says Kirk Henry, director of International equities at Boston Company Asset Management.

Technology and communications funds were laggards in March, falling 2.3% and 2.5%, respectively. Worst performers in their respective areas were Marketocracy Technology Plus Fund (TPFQX), which lost a punishing 8.6%, and Fidelity Select Developing Communications (FSDCX), which dropped 7.5%.

BOND BIND. Pacific funds without exposure to Japan fell 1.9%. And burdened by a stalling economy, Europe funds fell 2.8%, making that March's worst-performing fund category. FTI European Smaller Companies (FESCX) was the worst-performing fund in that group, with a -5.5% return for the month.

On the fixed-income side, emerging-market bond funds were the only ones with any oomph. That category climbed 2.5%. Long-bond funds (both government and general) held their own with a 1.2% rise. But the average bond fund gained just 0.1% in March as returns at funds with short maturities were negligible, and many muni-fund categories slipped into the red.

Overall, March was a month in which the virtues of diversification were well-proven as investor confidence cooled then warmed in anticipation of better news to come in April.

Funds rated A in March:

ABN AMRO Mid Cap N

ABN AMRO Real Estate N

AIM Real Estate A

AXP Precious Metals A

Aegis Value

Al Frank

AllianceBernstein Real Est Invstmnt Adv

AllianceBernstein Real Est Invstmnt Instl I

Alpine Realty Income & Growth Y

Alpine US Real Estate Equity Y

Amer AAdvantage Small Cap Value Instl

Amer Century Glbl Gold Inv

Amer Century Real Estate Inv

Amer Century Sm Cap Vl Inv

Amer Century Sm Company Inv

Armada Small Cap Value I

Artisan Small Cap Value

Babson Enterprise

Babson Shadow Stock

Berwyn

Bjurman Barry Micro Cap Growth

BlackRock International Opportunities Inv A

Boston Partners Small Cap Value II Invest

Brazos Real Estate Securities Y

Bridgeway Aggressive Investors 1

Bridgeway Micro Cap Limited

Bridgeway Ultra Small Company

Bridgeway Ultra Small Company Market

Bruce

Buffalo Small Cap

CGM Focus

CGM Realty

CRM Small Cap Value Instl

Calamos Growth A

Cohen & Steers Realty Shares

Cohen & Steers Special Equity

Columbia Acorn Z

Columbia Small Cap Z

Delafield

Delaware RE Inv Tr A

Dreyfus Gr & Val Fds Midcap Value

Dreyfus Premier Greater China A

Driehaus Emerging Markets Growth

Driehaus International Discovery

Eaton Vance Asian Small Companies A

Emerald Select Banking & Finance A

Evergreen Precious Metals Holdings A

Evergreen Small Cap Value I

Excelsior Real Estate

F Russell Real Estate Securities S

FBR Small Cap A

FBR Small Cap Financial A

FMC Strategic Value

FMI Focus

Fidelity Low Priced Stock

Fidelity Real Estate Investment

Fidelity Select Gold

Fidelity Small Cap Stock

Fifth Third Micro Cap Value Instl

First American Real Estate Securities Y

First American Sm Cap Select Y

First American Small Cap Growth Opport Y

First Eagle Gold

First Eagle Overseas A

Franklin Gold & Precious Metals A

Franklin Microcap Value

Fremont US Micro Cap

Fremont US Micro Cap Instl

GMO Emerging Countries III

GMO REIT III

Gabelli Gold

Gabelli Westwood Realty AAA

Goldman Sachs Real Estate Sec A

Goldman Sachs Small Cap Value A

Harding Loevner Emerging Markets

Harris Insight Small Cap Value N

Heartland Value

Heartland Value Plus

Hennessy Cornerstone Growth

Hotchkis & Wiley Mid-Cap Value I

Hotchkis & Wiley Small Cap Value I

ICM/Isabelle Small Cap Value Inv

ICON Energy

IMS Capital Value

ING Precious Metals

ING Russia A

INVESCO Energy Inv

INVESCO Gold & Precious Metals Inv

Ivy Global Natural Res A

Ivy Real Estate Securities A

J Hancock Classic Value A

JPMorgan Mid Cap Value I

Janus Mid Cap Value Inv

Janus Small Cap Value Inv

Jennison Natural Resources A

Lord Abbett Small Cap Value A

MFS International New Discovery A

MTB Small Cap Growth A

MainStay Small Cap Value B

Matthews Asian Growth & Income

Matthews China

Matthews Korea

Matthews Pacific Tiger

Meridian Growth

Meridian Value

Merrill Lynch Global Small Cap C

Merrill Lynch Master Small Cap Value B

Morgan Stanley Instl US Real Estate A

Munder Healthcare B

Munder Micro Cap Equity A

Munder Small Cap Value Y

NI Numeric Investors Emerging Growth

NI Numeric Investors Small Cap Value

Needham Growth

Neuberger Berman Genesis Inv

OCM Gold

Oberweis Micro Cap

One Group Small Cap Value I

Oppenheimer Developing Markets A

Oppenheimer Gold & Special Minerals A

PBHG REIT Advisor

PIMCO RCM Biotechnology D

Pacific Capital Small Cap Y

Perkins Discovery

Perritt Micro Cap Opportunities

Phoenix-Duff & Phelps Real Estate Sec A

Pioneer Small Cap Value A

Principal Real Estate Securities A

RS Contrarian Value

RS Global Natural Resources

RS Partners

Royce Low Priced Stock

Royce Micro-Cap Inv

Royce Opportunity Inv

Royce Pennsylvania Mutual Inv

Royce Premier

Royce Select

Royce Special Equity

Royce TrustShares Inv

Rydex Precious Metals

STI Classic Small Cap Value Equity L

Schroder Capital US Opportunities Inv

Scudder Gold & Precious Metals S

Security Capital US Real Estate

Security Mid Cap Value A

Sentinel Small Company A

Spirit of America Real Estate A

State Street Research Aurora A

State Street Research Global Resources A

Strategic Partners Real Estate Securities B

Stratton Monthly Dividend REIT

Stratton Small Cap Value

Strong Advisor Small Cap Value Z

Strong Mid Cap Disciplined

T Rowe Price Intl Discovery

T Rowe Price Real Estate

T Rowe Price Small Cap Value

TCW Galileo Opportunity I

TCW Galileo Value Opportunities I

Third Avenue Real Estate Value

Third Avenue Small Cap Value

Third Millennium Russia

Tocqueville Gold

Tocqueville Small Cap Value

Touchstone Emerging Growth A

Turner Micro Cap Growth

Turner Small Cap Value

US Global Accolade Eastern European

US Global Inv Global Resources

US Global Inv Gold Shares

US Global Inv World Prec Minerals

USAA Precious Metals & Minerals

Undiscovered Managers Behavioral Vl Instl

Undiscovered Managers REIT Instl

Value Line Emerging Opportunities

Van Eck Intl Investors Gold A

Vanguard Capital Opportunity

Vanguard Energy

Vanguard Precious Metals

Vanguard REIT Index

Wasatch Core Growth

Wasatch Micro Cap

Wasatch Small Cap Growth

Wasatch Small Cap Value

Wasatch Ultra Growth

Wells Fargo Small Cap Opportunities I

iShares MSCI Malaysia Index

Stone is a senior writer at BusinessWeek Online and covers the markets as a Street Wise columnist